by Hong Minh
The rumour about the State Bank of Viet Nam (SBV) considering changing its banknotes came to me early last week.
While I treated it as a late April Fool's Day joke, many believed the change would actually occur.
The central bank refuted the rumour in a timely fashion on Monday, but many people still believed it, contributing to the recent fluctuation in the market.
As the rumour began to circulate on social networks, the exchange rate suddenly increased, despite the three-day vacation last weekend. The rate applied in the market reached VND21,500 per US dollar– the highest rate in the last several months.
The incident reminds me of other recent false rumours that also shook the financial and banking sector. For instance, rumours about the issuance of a VND1 million banknote in 2009 caused worries about possible currency devaluation.
When people first heard this rumour, the inter-bank rate skyrocketed while the stock market fell significantly.
Most recently, February's false rumour about the arrest of Tran Bac Ha – the president of the Bank for Investment and Development of Viet Nam (BIDV) –caused estimated losses of nearly VND34 trillion (US$1.6 billion) after just one day.
In most of these cases, victims and involved parties responded quickly to the public's concerns, quickly stabilising the situation.
However, for many, confusion remains: how do these rumours have so much influence over the market in Viet Nam?
In an interview with a local online newspaper, Alan Phan, a Viet kieu (overseas Vietnamese) fund manager, said that the Vietnamese market was extremely vulnerable to rumours.
In the US, false rumours could only exist for 10 minutes, as the watchdog agencies would clarify the case immediately, he said. But in Viet Nam, rumours could circulate for days – as in the case of the BIDV president.
I totally agree with Alan's statement that the market is vulnerable to rumours. But we need to take a deeper look.
Rumours normally target essential and vulnerable commodities at a sensitive time when the national or international economy is witnessing big changes. False rumours in recent years have mostly coincided with Government moves.
The rumour about the banknote change started last week, when the committee on drafting amendments to the 1992 Constitution proposed changing the country's name to the Democratic Republic of Viet Nam.
And the rumour about a potential VND1 million banknote increased when the central bank decided to officially devaluate the Viet Nam dong by 9.3 per cent by raising the inter-bank rate from VND18,932 to VND20,693 per dollar.
At those times, many investors who could not access trustworthy news sources believed the rumours, feeling that policies were changing rapidly. Many lost faith in the safety of their investments.
As a result, I think it is necessary for parties involved in rumours to prepare for sudden changes and forecast any risks. Enterprises should equip themselves with knowledge about crisis management so they can provide the public with correct information. Meanwhile, investors should also decide which news sources are the most reliable.
Those who spread rumours for the purposes of sabotaging the market, whether or not they are true, should be severely punished so they do not do so again. Above all, it is necessary for policy making agencies to explain any policy changes to the public. That would be a good way to restore peoples' faith.
It is time for the Government to issue only detailed and clear information. Investors and enterprises need specifics about new policies and how these will affect them, rather than general information about monthly achievements or quarterly economic growth accompanied by statistics that are not directly related. By providing such information, transparently and openly, the Government can quash rumours and end these chaotic situations in the market. — VNS